Reduce Student Debt to Find Financial Freedom!

In an article published in December 2011 on the financial portal ‘Business Insider’, some real life stories about people who applied for loans for their education were illustrated.

These student debt stories provide a clear picture of how borrowers struggle to shake off the crushing burden of student loans.

All these instances described various situations faced by the student community that make it economically stressed.

A summary of some stories on the website are:

Case 1:
A borrower took out a loan to study Art and Game Design and ended up owing $ 100,000 in debt.

Case 2:
This person’s original loan amount was $ 80,000 which increased to a whopping $ 135,000!

Box 3:
In 2005 a loan was taken from a leading bank and repayment terms could not be negotiated. Even after the borrower’s repeated request to negotiate, the loan was sent to one of the bank’s collection agencies.

Many readers can easily relate to the three cases mentioned above. These are some of the common scenarios borrowers face due to job loss, bankruptcy, or high medical bills. Such cases create obstacles for people, making it difficult for them to pay off their debts and get rid of their financial responsibility.

Other factors causing student debt
Aside from current financial conditions, there are other factors that can cause student debt. It could be due to multiple loans along with variable interest rates coming up, interest compounding, or interest-only payment options. They eventually accumulate in large numbers.

There are many borrowers who have not defaulted on their credit card, auto loan, or mortgage debt. They even have a good credit score. However, due to the reasons mentioned above, they will never be able to pay off their student loans.

One of the best solutions for debt relief for these borrowers is to consolidate their various loans into a single loan amount. This way, they only need to make a single monthly payment at a revised interest rate.

How to Consolidate Student Loans
A borrower who cannot pay his student debts can consolidate multiple loans through federal direct consolidation programs and regain control of his financial situation.

When consolidating loans, borrowers should not combine their federal and private loans. The Department of Education does not allow the consolidation of private loans.

Federal student debt relief services are a great way to get the maximum benefits from federal loans. Student debt relief consultants provide a suitable solution as they have the experience to match each loan with eligible repayment plans.

Some leading companies offer comprehensive assistance and guidance to borrowers for a reasonable one-time fee. In this way, they can find a solution without problems and be calm.

Student loan consolidation plans

Income-based payment plan
Unlike traditional lending practices, the only factors that go into determining a borrower’s monthly payment are annual adjusted gross income and family size. Credit score and loan amount are not taken into account.

Only loans available under the Federal Family Education Loan Program (FFEL) and the Federal William D. Ford Direct Loan Program qualify for an Income Based Payment Plan.

Contingent income reimbursement
This plan has been designed for those who are not eligible for Income Based Pay (IBR) or Pay As You Earn plans. Direct Subsidized, Unsubsidized, PLUS Direct Loans, and Direct Consolidation Loans qualify for this plan.

Standard payment plan
Through this plan, student debts can be paid in the shortest time possible. It requires a fixed monthly payment to be made for a period of up to 25 years.

Gradual payment plan
Under this program, the initial monthly payments are low. The payment amount will subsequently increase by 4.25 percent (approximately) each year.

Besides consolidation, another quick way to get rid of all your student loans is to qualify for a loan forgiveness program.